Brazil's Oi SA reports 2Q net loss as TIM Brasil says World Cup hit bottom line

7 Aug 2014

Brazilian telecoms carrier Oi SA booked a net loss of BRL221 million (USD97 million) in the three months to 30 June 2014, compared to a BRL124 million net loss in the corresponding year-earlier period and net income of BRL228 million in Q1 2014, the operator said in its first earnings release since combining assets with parent Portugal Telecom (PT). With the two companies currently involved in a structural merger of their respective operations, in a securities filing Oi attributed the decline in the main to lower EBITDA ‘due to lower non-routine revenue, including the negative impact related to the sale of the second tranche of mobile towers in Q1.’ Revenue in Brazil reached BRL6.93 billion, a 2% year-on-year fall, while PT booked turnover of BRL1.85 billion, up 9.5%, and consolidated revenue was BRL9.0 billion – up 0.4% as a result of the depreciation of the euro versus the Brazilian real. EBITDA though dropped a significant 21.3% to BRL2.55 billion and net debt surged 52.8% to BRL46.2 billion; CAPEX was BRL1.67 billion, down 13.3%.

In its filing, Oi said that revenue in Brazil was affected by a reduction in mobile termination rates (MTRs) for mobile voice services, a decline in fixed (voice) revenue due to slow customer additions, a drop in fixed-to-mobile tariff plans and lower usage during the period of the FIFA football World Cup in June-July.

In an unrelated announcement, Brazil’s second largest mobile carrier TIM Participacoes (TIM Brasil) has reported a 5.2% fall in net profit in the second quarter of this year, blaming the drop by and large on lower activity during the World Cup, recently hosted by Brazil. According to TIM Brasil’s earnings release, all major indicators in the three months under review ‘performed negatively on an annual basis: net income declined to BRL365 million from BRL385 million in 2Q13, while net revenue fell 3.4% to BRL4.77 billion, affected by a 10.1% drop in the sales of products. Service revenue fell 2.0% to BRL3.9 billion due to a drop in traffic as people took time off work to enjoy the football event. EBITDA for April-June however, edged up 8.0% to BRL1.33 billion and the EBITDA margin improved by three percentage points to 27.9%. TIM Brasil closed out June with a total of 74.2 million customers, of which 61.9 million were pre-paid (1.9%) and 12.2 million were on contracts (7.4%). Within this, mobile data users swelled by 24% y-o-y to account for 39% of the total user base, broken down as 30.2 million 3G users (77%) and 990,000 4G subscribers (46.5%).

Brazil, Oi, TIM Brasil